Tax reliefs alone not enough to expand local production – Prof Gatsi

Prof John Gatsi, the Dean of School of Business of the University of Cape Coast (UCC), has downplayed the tax reliefs offered to local setups to bolster local production in the 2024 budget statement.

He said while it was laudable to use fiscal policy to incentivise production, such incentives must go beyond tax reliefs to absorb other costs critical to production to achieve the desired result.

He added that the taxes would not bring immediate relief.

“It doesn’t take tax incentives alone for people to set up factories. For instance, how much electricity are they paying for? What is the cost of other inputs that they are going to use?” he queried.

The economist was reacting to the 2024 Budget Statement delivered in Parliament by Mr Ken Ofori-Atta, the Minister of Finance, in an interview with the Ghana News Agency (GNA).

The finance minister announced a raft of tax waivers including import duties on raw materials for the local manufacture of sanitary pads; VAT on locally produced sanitary pads, and duties on semi-knocked down and completely knocked down electric vehicles.

He also announced tax waivers for the importation of agricultural machinery equipment and inputs and medical consumables and raw materials for the pharmaceutical industry.

Prof Gatsi indicated that the tax relief for the local production of sanitary pads, was not enough to immediately expand production capacity to meet demand and bring the needed relief.

“The situation will continue in 2024. So, what it means is that, for 2024, we will still have our market flooded with imported sanitary pads,” he cautioned.

“If this continues to be the case, then we are talking about 2025 thereabout but as to whether we will have the full capacity to feed the domestic market is something that will be contested,” he added.

To effectively encourage local production and consumption, Prof Gatsi opined that a complete ban on the importation of sanitary pads or an increase in the taxes on same would have been more prudent.

“It is not bad to try to incentivise domestic production, but you cannot incentivise domestic production while you are encouraging importation of the same item.

“If you are not encouraging importation of the item, you would have increased the import duty on the importation while you give tax incentives for domestic production,” Prof Gatsi added.

Source: GNA

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